All posts by scott hunt

Two Schools of Thought: COVID 19’s Impact on Gold

The current global Coronavirus pandemic which is only now showing some evidence of winding down has already made an enormous negative impact on the U.S. and global economy. So-called experts are predicting future economic impacts ranging from a short-term recession to a lengthy world-wide depression. Most financial pundits agree that both the equities and bond markets have and will continue to suffer negative long-term effects from this horrific event.

But what about gold? A global pandemic is new territory for the financial markets. We?ve seen how markets historically react to war, terrorism, recessions and bad economic news but a rampant life altering disease is both new and confusing in every aspect. As a result, there are two schools of thought on gold?s value in a COVID-19 world. Not surprisingly one group believes gold will regress in value while the other forecast is for a bull market in the yellow metal. I?ll present some arguments offered by both bulls and bears and let you decide.

The main argument for lower gold prices is that we are inevitably heading towards a lengthy period of deflation. Demand for gold may decline if investors fear deflation and move into nominal fixed payments, like U.S. Treasuries, considered by many a safe-haven investment. With non-existent interest rates and an unstable stock market, the paper asset crowd traditionally flees to cash, in this case U.S. Treasuries. There are those who believe that the U.S. Dollar has already bottomed versus other major currencies and that the Dollar still represents the strongest currency on earth. Considering the historical inverse relationship between gold and the Dollar, those betting on the future of the US currency feel gold will trend lower. During the financial crises of 1987 and 2008 gold prices initially rose but then drifted lower when a return to some semblance of normalcy began. Mainstream financial advisors believe that scenario will again play out over the next several months, time will tell.

However, gold ?bugs? have numerous reasons to think gold will minimally maintain its current levels and quite possibly test new highs. Many believe the Federal Reserve?s and other countries massive stimulus programs (translated: creating money from nothing) will ultimately prove inflationary. Gold usually reacts positively during inflationary periods. Volatile equities markets and non-existent interest rates will make even traditional investors consider gold for their portfolios. If a systematic banking crisis occurs due to the worldwide pandemic, gold is likely to retain its value or appreciate as it?s not part of the traditional fiat currency system. As I write this physical gold and other precious metals are in short supply due to mine and refinery closures. Shortages of tangible metal usually results in higher premiums for the consumer, effectively raising the price of gold ownership by 5% to 10% over the typical nominal premiums.

As mentioned, a global pandemic and its long-term effects are new territory for the world?s financial markets and the global economy. Considering all the current and potential future economic issues, both domestic and world-wide, we believe that precious metals can be a prominent part of a well-diversified portfolio.

An Introduction to Buying Silver 101

This article is a follow-up to our last blog which discussed the merits of owning physical gold. Both novices and long-time investors stand to benefit from a review of the basics of owning physical silver. The following list contains some, but not all, of the reasons to buy tangible silver. Some items on the list hold true for any precious metal, others are unique to silver.

  1. The most obvious reason to own silver is its comparative affordability. As I write this it?s possible to own physical silver for less than $20.00 per troy ounce. As a point of reference, gold is currently 80 times more expensive than silver. We frequently mention to our customers that it?s far more likely for silver to double in value to $37.00 than it would be for gold to double in value to $3000.00 per ounce. Simply put, if your primary motivation for buying precious metals is profit, silver offers you the best opportunity for appreciation.
  2. Silver is more of a commodity than gold. It has numerous practical uses in the fields of technology and medicine amongst others. Whereas virtually all of the gold mined throughout history is above ground and accessible, most of the silver ever mined is gone, much of it inaccessible in landfills, too expensive to recycle. Estimates of the above ground quantities of gold and silver vary wildly but all agree the accessible silver on this planet is far less than the current silver to gold 80:1 price ratio suggests. Based on supply considerations only, gold is either obscenely over valued or silver is grossly undervalued. We tend to believe the latter is true.
  3. If gold, platinum and palladium continue to trend higher many investors will choose to buy silver simply because the other metals are no longer in the average buyer?s budget. This point was touched on in our first pro silver argument. However, in this scenario silver would likely rise due to higher demand. In a precious metals bull market silver could become or already is ?the only affordable game in town? for many precious metal buyers.
  4. Readily available smaller units of silver would be far more useful in an unlikely but possible currency devaluation or financial collapse as well as during, God forbid, a natural disaster or war. Along the same lines, silver?s liquidity during a short-term financial crisis, whether it be unexpected bills or a medical emergency, makes it far more practical than its more expensive counterparts, gold, palladium and platinum.

Jack Hunt Gold and Silver, 2017 1oz US Silver Eagles Coin

There are numerous other reasons to own tangible silver, but many of these reasons apply to all precious metals, not just silver. I?ll review a few of them:

  1. Purchasing and owning tangible silver can be legally anonymous, especially if purchased through Jack Hunt Gold & Silver.
  2. Unlike bank deposits, equities, Treasuries and other paper investments, physical silver cannot default, go broke or file for bankruptcy.
  3. Physical silver is real?it is tangible. Currency, equities, Treasuries, etc., are just paper and promises from the issuer.

In conclusion it should be said that asset diversification is more important than ever in our turbulent and confusing times. We believe that a balanced portfolio should contain some traditional assets such as real estate, equities, bank accounts and cash. However, we strongly believe that a moderate percentage of one?s liquid assets be in precious metals. The non-commissioned professionals at Jack Hunt Gold & Silver would be happy to assist you in any form of precious metal related transactions. 

Recommended Viewing: $1 Trillion & US Debt in Physical $100 bills

Here’s a stunning video that provides visual context of the massive scale of our National Debt. The United States owes a lot of money. As of 2017, US deficit is larger than the size of the economy. Currently there is no debt ceiling, it has been suspended. To see current debt live visit US Debt Clock.